Solicitors for Property Overage

An overage agreement specifies that as part of the sale, the original owner is entitled to a specified further future financial increase in the value of property or land if certain agreed events occur.

When is Overage Used?

Overage is commonly used in situations where there is a good possibility of an event which will significantly increase the value of the land during a fixed, agreed time period after sale. Trigger events which are common include :-

• Planning Permission is a strong possibility which will significantly increase value - the seller anticipates the buyer obtaining planning permission for development, significantly increasing the land's value.

• Change of Use - the agreement applies if the property's use changes, leading to higher value (e.g. agricultural land converted to residential).

• Infrastructure development - the seller will benefit financially if nearby infrastructure projects enhance the property's value.

How an overage agreement works

For the overage agreement to be effective, the correct legal framework will need to be put in place and there are many considerations and matters which will need to be negotiated. This will ensure you are legally protected.

Assuming the overage is realistic, there are lots of issues to sort out. For example :-

• When will the overage amount be payable? - Is it when planning permission is granted or is it when the property is built, or when it is sold?

• Defining the trigger Event - the specific event(s) that activate the overage payment clause (e.g., planning permission granted).

• Calculation Method - how the additional payment is determined (e.g., percentage of the uplift in value).

• Overage Period - the timeframe within which the trigger event must occur for the overage clause to apply (usually 5-25 years).

The terms of overage agreements vary significantly and good negotiation is essential. Experience in negotiating overage terms matters and we have a lot of experience.

Please do get in contact.